“How much should we spend on cybersecurity?”

I get this question from founders constantly. And they’re usually shocked by my answer:

“Probably less than you think—but in very specific places.”

In a world of escalating cyber threats and vendor fear-mongering, this sounds like heresy. But after working with dozens of startups on their security programs, I’ve discovered a counterintuitive truth:

The size of your security budget matters far less than how strategically you deploy it.

In my previous articles, we explored why non-technical founders have a security advantage, the common security mistakes startups make, and the essential security concepts every founder should understand. Today, we’re tackling the money question—how to build a security budget that maximizes protection while minimizing costs.

The Big Problem with Most Security Budgets

When most startups finally decide to invest in security, they follow a flawed approach:

  1. They wait until they “have budget” for security (usually after a scary near-miss or customer demand)
  2. They buy expensive security tools recommended by vendors or peers
  3. They hire expensive security consultants or staff
  4. They end up with a hodgepodge of controls that don’t address their most critical risks

This approach is like buying an expensive home security system while leaving your front door unlocked. You’re spending money, but not reducing risk effectively.

Why More Security Spending Doesn’t Equal Better Security

Here’s a surprising fact that security vendors don’t want you to know: Many of the most devastating breaches happen at companies with multi-million dollar security budgets.

Why? Because they focus on the wrong things.

Consider these examples:

  • Equifax spent millions on advanced security tools but missed a basic patch that led to the exposure of 147 million Americans' personal data.

  • Target had a $1.6 million malware detection system that actually detected the attack—but the alerts were ignored because they didn’t have the right processes in place.

  • SolarWinds had extensive security investments but failed to prevent a build system compromise that impacted thousands of customers.

The pattern is clear: Security effectiveness isn’t about how much you spend, but about spending on the right things in the right order.

The 80/20 Rule of Security Budgeting

The Pareto Principle—the idea that 80% of results come from 20% of efforts—applies perfectly to security. In fact, security might be closer to a 90/10 rule:

90% of your risk reduction will come from just 10% of potential security investments.

The trick is identifying that critical 10%. For most startups, it includes:

1. Basic Hygiene Controls (Often Free or Low-Cost)

  • Strong authentication (with MFA everywhere)
  • Regular patching of all systems
  • Principle of least privilege access controls
  • Encryption of sensitive data
  • Basic security awareness for all employees

2. Process Over Products

  • Clear security responsibilities
  • Documented incident response plans
  • Regular access reviews
  • Vendor security assessment process
  • Security requirements in development

3. Strategic Risk Management

  • Regular, business-focused risk assessments
  • Clear acceptance criteria for identified risks
  • Alignment of security priorities with business goals
  • Executive visibility into security posture

Together, these fundamentals—which often cost very little to implement—prevent the vast majority of security incidents.

The High-Impact, Low-Cost Security Investments

Now let’s get specific. Here are the security investments that give startups the biggest bang for their buck:

1. Password Manager + MFA Everywhere ($3-10 per user/month)

This simple combination prevents the most common attack vector: credential compromise. A good password manager ensures strong, unique passwords for every service, while multi-factor authentication adds a critical second layer of protection.

ROI: Prevents up to 80-90% of account compromise attempts for just a few dollars per user.

2. Endpoint Protection ($3-8 per device/month)

Basic antimalware and endpoint protection tools provide a crucial safety net against common threats. You don’t need the most expensive solution—even Microsoft Defender (included with Windows) provides decent protection when properly configured.

ROI: Blocks common malware and provides early warning of potential compromises at minimal cost.

3. Cloud Security Configuration ($0-5k one-time setup)

Most cloud security issues stem from misconfiguration, not sophisticated attacks. Spending a small amount on proper initial setup of your cloud environment (or learning to do it yourself) prevents costly mistakes.

ROI: Prevents the most common cloud breaches with minimal investment.

4. Security Awareness Training ($0-20 per user/year)

You don’t need expensive training platforms. Free resources combined with regular team discussions about security topics can be just as effective as costly solutions.

ROI: Reduces successful phishing and social engineering attacks by 50-70% with minimal cost.

5. Basic Security Monitoring ($0-500/month)

Start with the free logging and monitoring tools provided by your cloud provider and key applications. Configure basic alerts for unusual activities.

ROI: Reduces detection time from months to days or hours with minimal investment.

How to Build a Strategic Security Budget in 4 Steps

Now that you know where to focus, here’s how to build a security budget that maximizes protection while minimizing waste:

Step 1: Start with a Risk Assessment, Not a Shopping List

Before spending a single dollar, identify your most critical assets and the most likely threats to those assets:

  • What data, if compromised, would cause the most damage?
  • What systems, if disrupted, would most impact operations?
  • What are the most likely attack vectors given your business model?

This assessment doesn’t need to be complex—even a simple spreadsheet mapping assets to threats with rough impact estimates will help prioritize your investments.

Step 2: Build a Phased Approach

Don’t try to solve every security problem at once. Instead, build a phased security roadmap:

Phase 1: Foundations (0-6 months) Focus on the fundamentals: authentication, access control, basic endpoint protection, and security awareness.

Phase 2: Visibility (6-12 months) Add monitoring and detection capabilities so you know when something goes wrong: logging, basic security monitoring, and incident response procedures.

Phase 3: Maturity (12+ months) Enhance your security program with more sophisticated controls based on your specific risk profile and business requirements.

Step 3: Budget by Risk Reduction, Not by Category

Instead of the traditional approach of allocating budget by security domains (network security, endpoint security, etc.), allocate based on risk reduction:

  • High-risk areas: Invest first and most heavily
  • Medium-risk areas: Address with basic controls
  • Low-risk areas: Minimal investment or accept the risk

This approach ensures your limited security dollars go where they matter most.

Step 4: Measure and Adjust

Security spending should never be set-and-forget. Establish simple metrics to track the effectiveness of your security investments:

  • Number of incidents prevented vs. cost of prevention
  • Mean time to detect and respond to security events
  • Security debt reduction (fixing known vulnerabilities)
  • Security friction reduction (making security easier for users)

Use these metrics to continuously refine your security budget allocation.

The Startup Security Budget Template

For most early-stage startups (pre-Series B), here’s what an effective security budget might look like:

Total annual security spend: 1-3% of overall operating budget

Allocation:

  • 40%: Core security tools and services (password manager, MFA, basic endpoint protection)
  • 25%: Outsourced security expertise (fractional CISO, penetration testing)
  • 20%: Security process implementation and automation
  • 10%: Security training and awareness
  • 5%: Contingency for unexpected security needs

This lean approach provides significant security improvements while remaining budget-friendly.

When to Spend More (And When Not To)

There are legitimate reasons to increase your security budget, but they should be driven by business needs, not fear:

Valid reasons to increase security spending:

  • Entering regulated markets that require specific controls (healthcare, finance)
  • Handling significantly more sensitive data as you scale
  • Enterprise customers with specific security requirements
  • Expanding internationally with new regulatory needs
  • Significant changes in your threat landscape

Poor reasons to increase security spending:

  • Fear after reading about the latest breach in an unrelated industry
  • Vendor pressure about the “next big threat”
  • Trying to build a “perfect” security program (it doesn’t exist)
  • Addressing theoretical risks without business impact
  • Following what large enterprises do (their context is different)

The Bottom Line: Security as an Investment, Not a Cost Center

The most effective security programs aren’t the most expensive—they’re the most strategic.

By focusing on high-impact, low-cost fundamentals first, then strategically expanding based on your specific risks and business needs, you can build a security program that provides maximum protection with minimum waste.

Remember: in security, how you spend is far more important than how much you spend.

Next Steps: From Feeling Secure to Being Secure

Having a strategic security budget is essential, but it’s only effective if you’re measuring the right things. In my next article, “Why Your Security Feels Solid (But Isn’t): The Measurement Mistake Most Founders Make,” I’ll show you how to tell whether your security investments are actually working.

In the meantime, I recommend reviewing your current security spending against the high-impact areas I’ve outlined above. Are you investing in the fundamentals first, or jumping to advanced solutions before you’ve covered the basics? The answer might surprise you.